Alternative fee arrangements: not the cure for the billable

by Vault Law Editors | March 09, 2010

  • My Vault

Law is unique: in no other profession, with the possible exception of the world’s oldest, does one get paid more for taking more time to perform a task.

The billable hour: it's hard to imagine an institution so entrenched and yet with so few defenders or even apologists.

Writing in Technolawyer’s BigLaw newsletter, Marin “Pls Handle Thx”  Feldman ponders the monetized (& inflatable) six minute increment:

In the traditional model, the billable hour fee arrangement works in tandem with firm's compensation practices to create the perfect storm of perverse incentives to overbill. ... The promise of bigger bonuses entices attorneys to inflate their hours, and the lure of higher revenue motives the firm to accept the bloated time records at face value and pass them onto clients unchecked.

Paying lockstep compensation doesn't thwart overbilling either since attorney evaluations, class advancement, raises, and job security remain tied to billables. Internal rankings for possible future partners also use this metric. Yet worst of all, neither the firm nor its attorneys have any incentive to tackle the hour-padding problem since the client is the only that pays for it — both literally and figuratively.


However, Marin maintains merit-based comp schemes will have little impact on bill padding:

[F]irms that have migrated to merit-based compensation such as Howrey and Foley & Lardner continue to consider billable hours when determining associate compensation, which means that associates still have incentive to inflate their hours.

Fixed-fee arrangements provide the proper incentives for law firms to work efficiently and control client cost. But as long as attorney compensation and evaluations remain tied to billable hours, individual attorneys still have reason to embellish their diaries. As a result, flat fees simply shift the hour-padding burden from clients ... to the firms themselves[.]

-posted by brian

Filed Under: Law

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